Options Trading News

The SPDR Consumer Discretionary Fund is on pace for a record-high close, and one large trader apparently believes that current levels will hold.

More than 33,000 XLY options have already changed hands so far today, compared to a daily average of 4,300 contracts in the last month. Almost all of the activity came in a single trade.

optionMONSTER's systems show that 31,000 October 47 puts were sold for $0.20. This volume was more was more than 10 times the open interest in the strike at the beginning of the day, clearly indicating a new position.

The XLY is up 0.74 percent to $47.82. This would be an all-time closing high, though the exchange-traded fund did see high intraday levels in mid-September up to $48.01. Shares were below $35 a year ago but broke though long-term resistance at $46 early last month.

The put sale is betting that the XLY will be above $47 when the options expire in two weeks. The trader is willing to take on the risk of having to buy the stock if it falls below that strike price. (See our Education section)

So far, my articles have taken you through a logical progression of option theory and fundamental concepts of options. As of yet, I have not mentioned a single strategy and for a good reason! The actual application of a strategy should come AFTER you learn about the option product itself.

optionMONSTER® provides stock market insight, advanced options education, and actionable trade ideas to meet the needs of do-it-yourself investors. After spending decades in the trading pits of Chicago, Jon 'DRJ' and Pete Najarian founded the company in 2005 to help people better manage their own investment portfolios.

OptionsHouse is separate from but affiliated with optionMONSTER®. Both are subsidiaries of Aperture Group, LLC.

All investments involve risk, and the past performance of a security, industry, sector, market, financial product, trading strategy, or individual's trading does not guarantee future results or returns. Investors are fully responsible for any investment decisions they make. Such decisions should be based solely on an evaluation of their financial circumstances, investment objectives, risk tolerance, and liquidity needs.

optionMONSTER's reference to specific securities should not be construed as a recommendation to buy or sell that security. Specific securities are mentioned for informational purposes only.